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How Colorado taxes retirement income

Some 2026 figures pending confirmation  Tax year 2026 · research last updated October 2, 2026

  • Colorado taxes some Social Security, depending on age or income.
  • Exclusions and subtractions for retirement income (details below):
    • Pension and annuity subtraction: from age 55, at most $24,000 per person, income limits apply.
  • Rates for 2026: 4.4% flat rate.

At a glance

Income taxYes
Rates (2026)4.4% flat rate
Starts fromFederal taxable income
Social SecurityPartly taxed, depending on age or income
Retirement income exclusions1 (see below)
Roth conversionsTaxable
Capital gainsTaxed like other income
Local income taxYes, in some places (see below)

Social Security

Colorado taxes some Social Security, depending on age or income.

Colorado starts from federal taxable income, so only federally taxable Social Security (1040 line 6b) is in the base. Per person (joint returns split taxable SS by each spouse's share of gross benefits): age 65+ at Dec 31 -> subtract ALL taxable SS. Age 55-64 at Dec 31 -> subtract all taxable SS if federal AGI <= $75,000 (single) or <= $95,000 (married filing jointly) [tax years 2025+]; otherwise SS subtraction is capped at $20,000. Under 55 -> only SS received as a death/survivor benefit, capped at $20,000. The SS subtraction reduces that person's remaining pension/annuity cap ($24,000 at 65+, $20,000 at 55-64): pension subtraction = min(taxable pension+IRA income, cap - SS subtracted, floor 0).

Pensions, IRAs and 401(k)s

Pension and annuity subtraction (C.R.S. 39-22-104(4)(f); DR 0104AD lines 3-6)

Age: 55+ · Limit: $24,000 per person · Applies to: pensions, annuities, IRA distributions, 401(k) distributions/403b, Social Security (shares the cap), permanent disability pay (55+)

Per person, age measured at December 31: 55-64 -> up to $20,000; 65+ -> up to $24,000; under 55 -> up to $20,000 only for death-benefit (beneficiary) pension/annuity income. Social Security subtracted counts first against the same cap (so a 65+ person with >= $24,000 of taxable SS gets no pension subtraction). Each spouse computes separately using only his/her own income; unused cap cannot be shifted to the other spouse. Qualifying: pensions/annuities (1040 line 5b), taxable traditional/SEP/SIMPLE IRA distributions (line 4b), 401(k)-type distributions, fully-matured purchased annuities. Excluded: premature distributions subject to the federal 10% penalty, non-permanent disability pay, amounts claimed under another subtraction. Railroad retirement and (under 55) military retirement have separate subtractions not subject to this cap.

Income limit: None for the pension cap itself; the only income test is the 55-64 full-SS rule (federal AGI <= $75,000 single / $95,000 joint).

Roth conversions

A Roth conversion counts as taxable income for Colorado. Whether a retirement income exclusion can cover part of it depends on the rules above.

Capital gains

Taxed like other income, at the rates above. The only remaining special subtraction is for gains on qualifying Colorado agricultural land.

Credits and relief for older residents

  • TABOR state sales tax refund. When a TABOR surplus exists, full-year residents get a refundable amount looked up by modified AGI (federal AGI + nontaxable SS + nontaxable state/local bond interest). None for TY2026 (no FY2025-26 surplus, State Controller certification Sept 8 2026; LCS Sept 2026 forecast). The LCS forecast expects six-tier refunds for TY2027-2029 (amounts vary) - treat as zero in projections.
  • Property Tax/Rent/Heat Credit rebate (PTC). Separate application (not part of the income tax return) for low-income older/disabled residents; income-limited. Not modeled.

Local income taxes

A few Colorado cities (e.g., Denver, Aurora) levy small flat monthly occupational privilege taxes on employees' wages only; they do not apply to retirement or investment income.

More detail from our research notes

Line 1 of the DR 0104 is FEDERAL TAXABLE INCOME, so the federal standard deduction (including the extra amount for age 65+/blind), itemized deductions, and federal deductions such as the OBBBA $6,000 senior deduction (2025-2028) flow through automatically unless Colorado decouples. Additions a retiree may hit: state income tax deducted federally (itemizers) is added back; if federal AGI is $300,000 or more, itemized or standard deductions above $1,000 (single return, incl. MFS/HoH) or $2,000 (joint) are added back from TY2026 (C.R.S. 39-22-104(3)(p.7), Proposition MM via HB25-1274 sec. 18; the $12,000/$16,000 Prop FF (p.5) allowance applied TY2023-2025 only); QBI deduction addback when AGI > $500,000/$1,000,000; starting 2026 the federal overtime deduction is added back (tips are not). Rate 4.4% (C.R.S. 39-22-104(1.7)); 2026 Form 0104EP uses 4.4%. A TABOR-triggered temporary rate reduction (e.g., 4.25% for 2024) depends on the fiscal-year surplus: for TY2026 there is none (State Controller certified Sept 8 2026 that FY2025-26 revenue fell $175.9M below the Referendum C cap, so no TABOR refund of any kind for TY2026; LCS Sept 2026 forecast), so 4.4% is final for 2026. The TABOR sales-tax refund is likewise zero for TY2026. Interest on U.S. obligations is subtracted. Full-year residents use the tax table (in $100 rows at midpoint) in Book 104.

Pending confirmation

These points were still being confirmed against Colorado's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.

5 items
  • OBBBA $6,000 senior deduction (IRC 151(d)(5)(C)): no Colorado addback exists in statute; the State Auditor's 2026-TE5 report lists it among the federal deductions that reduce the Colorado base. Treated as flowing through; confirm no addback line on the 2026 DR 0104AD (Dec 2026-Jan 2027).
  • Whether a Roth conversion counts as a qualifying 'IRA distribution' for the pension subtraction: DOR guidance says taxable IRA distributions on 1040 line 4b qualify (conversions appear there) and conversions are not penalty-subject premature distributions, but DOR does not address conversions explicitly.
  • The 55-64 full-SS test uses 'federal adjusted gross income' per the 2025 booklet; confirm whether head-of-household/MFS filers use the $75,000 single threshold (booklet mentions only single and married filing jointly).
  • 2026 DR 0104 booklet / DR 0104AD not yet published (expected Dec 2026-Jan 2027 at https://tax.colorado.gov/individual-income-tax-forms); pension/SS rules taken from the 2025 booklet and Jan 2025 Income Tax Topics. No 2026 change found: SB25-136 died, and the 2026 session's income tax bills (HB26-1223 family credit, HB26-1289 EITC/credits) do not touch retirees (LCS Sept 2026 forecast pp. 21, 40).
  • Local occupational privilege tax list and PTC rebate eligibility not researched from primary sources (neither affects retirement income).

Sources

Every figure comes from these documents, mostly the state's own forms, instructions and statutes.

  1. 2025 Colorado Individual Income Tax Filing Guide (Book 104): 4.4% rate and tax table, SS and pension subtraction line instructions, $300k deduction addback, QBI addback, TABOR refundhttps://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf
  2. Income Tax Topics: Social Security, Pensions and Annuities (rev. Jan 2025)https://tax.colorado.gov/sites/tax/files/documents/ITT_Social_Security_Pensions_and_Annuities_Jan_2025.pdf
  3. 2026 DR 0104EP estimated tax: 4.4% of Colorado taxable incomehttps://tax.colorado.gov/sites/tax/files/documents/DR_0104EP_2026.pdf
  4. SB25-136 (uncap pension subtraction from 2026) postponed indefinitelyhttps://leg.colorado.gov/bills/SB25-136
  5. Secondary: HB25B-1001 fiscal note (QBI addback extension; overtime addback from 2026)https://content.leg.colorado.gov/sites/default/files/documents/2025B/bills/fn/2025b_hb25b-1001_f1.pdf
  6. State income tax addback worksheet (DR 0104 line 2): 5e - local income tax - 5b - 5c, limited to itemized - federal standard deduction (Income Tax Topics: State Income Tax Addback, rev. Nov 2025, pp. 1-2); line 4 reduced by the line 2 addback (Book 104…https://tax.colorado.gov/sites/tax/files/documents/ITT_State_Income_Tax_Addback.pdf
  7. federalStandardDeduction*, federalAged*: 2026 federal standard deduction and additional amounts, Rev. Proc. 2025-32 sec. 4.15https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
  8. HB25-1274 enrolled, sec. 18: C.R.S. 39-22-104(3)(p.5) limited to TY2023-2025; (3)(p.7) $1,000 single / $2,000 joint deduction allowance for federal AGI >= $300,000 from TY2026 ; LCS Proposition MM analysishttps://leg.colorado.gov/sites/default/files/documents/2025A/bills/2025a_1274_enr.pdf
  9. LCS Economic & Revenue Forecast, Sept 2026: no TABOR refund for TY2026 (Controller certification Sept 8 2026), no rate reduction expected TY2027-2028, 4.36% forecast TY2029; Prop MM approved Nov 2025https://content.leg.colorado.gov/sites/default/files/2026-09/sept2026-forecast-with-cover-for-remediation-and-posting-accessible.pdf
  10. State Auditor 2026-TE5 report: (p.7) $1,000/$2,000 addback from 2026; senior deduction in the Colorado basehttps://content.leg.colorado.gov/sites/default/files/2026-te5-report-federal-tax-law-provisions-and-changes-impact-colorado-accessible.pdf
  11. Colorado SOS: Nov 2026 ballot measures, Amendment 87 (#195 graduated tax) and Proposition 136 (#232 4.4% cap)https://www.coloradosos.gov/pubs/elections/Initiatives/ballot/contacts/2026.html

Taxtirement's Colorado calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.

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This page summarizes Colorado's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.